Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 8, Problem 4P
(a)
To determine
The PPC graph for each country and also the intercepts and slopes of the PPC.
(b)
To determine
The
(c)
To determine
The country which has
(d)
To determine
The consumption of computers in Thailand and the consumption of rice in US in case of no trade.
(e)
To determine
The tons of rice consumed when both the countries enter into an agreement.
(f)
To determine
The decision of country T and US regarding the proposal.
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In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.
Who has the absolute advantage in the production of rubber or radios? How can you tell?
Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios?
Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber?
In this example, does each country have an absolute advantage and a comparative advantage in the same good? e. In what product should Japan specialize? In what product should Malaysia specialize?
The country with the lower cost has the comparative advantage and will specialize in that product. This means [Republic Of Trade or Econ Land] specializes in making computers, and [Republic Of Trade or Econ Land] grows corn.
Without trade both countries produce both products: Econ Land grows 100 bushels of corn and makes 50 computers in an hour, and the Republic of Trade grows 80 bushels of corn and makes 220 computers in an hour. Show that if they specialize and trade 70 computers in exchange for 90 bushels of corn, they end up with more of both products.
Choose any two goods. Draw a PPC showing the country producing at a point using all of its resources productively. Label this Point A
Label Point B on your diagram, showing a point where there would be unused resources. Would the country choose to produce at Point B? Explain.
Label Point C on your diagram, showing a point where this country does not have enough resources to produce this combination of goods. What would have to happen for this country to be able to produce at Point C?
Chapter 8 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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